Adobe 1999 Annual Report Download - page 10

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Order Fulfillment
The procurement of the various components of packaged products, including CDs and printed
materials, and the assembly of packages for retail and other applications products is controlled by order
fulfillment operations. We outsource all of our order fulfillment activities to third parties in the United
States, Europe, and Asia.
To date, we have not experienced significant difficulties in obtaining raw materials for the manufac-
ture of our products or in the replication of CDs, printing, and assembly of components, although an
interruption in production by a supplier could result in a delay in shipment of Adobe’s products. The
backlog of orders as of December 31, 1999 was approximately $33.5 million.
Technical Support and Education
For application software, a technical support and services staff responds to customer queries by
phone, on-line, via e-mail and user-to-user forums. Free technical phone support is provided to customers;
for customers in Europe, until our release of the second new full version after the version purchased by the
customer, and for customers in the rest of the world, up to a maximum of 90 days upon the customer’s first
call. We have also invested in improving self-help and on-line technical support capabilities so that
customers can find answers to their support questions via Adobe’s Web site and have also outsourced our
initial levels of technical support to provide a consistent standard for customer support on a worldwide
basis.
We inform customers through our Adobe Magazine and through a growing series of how-to books
published by Adobe Press pursuant to a joint publishing agreement with Macmillan Computer Publishing.
In addition, we prepare and authorize independent trainers to teach Adobe software classes in person or
increasingly via computer-based and internet-based training programs. We sponsor workshops led by our
own graphics staff, interact with independent user groups, and conduct regular beta-testing programs.
Investment in New Markets
We own a majority interest in three venture capital limited partnerships, Adobe Ventures L.P.; Adobe
Ventures II, L.P.; and Adobe Ventures III, L.P., that invest in early stage companies with innovative
technologies. These companies may create new market opportunities for us or enhance our existing
business.
The investments in Adobe Ventures L.P.; Adobe Ventures II, L.P.; and Adobe Ventures III, L.P. are
accounted for using the equity method of accounting, and accordingly, the investments are adjusted to
reflect the Company’s share of Adobe Ventures L.P.; Adobe Ventures II, L.P.; and Adobe Ventures III,
L.P.’s investment income (loss) and dividend distributions. Adobe Ventures L.P.; Adobe Ventures II L.P.;
and Adobe Ventures III, L.P. carry their investments in equity securities at estimated fair market value and
unrealized gains and losses are included in investment income (loss). The stock of substantially all of the
technology companies held by the limited partnerships at December 3, 1999 is not publicly traded, and,
therefore, there is no established market for these investments. As such, these investments are valued
based on the most recent round of financing involving new non-strategic investors and estimates made by
the general partner, a third party. When investments held by the limited partnerships are publicly traded,
the fair value of such investments is based on quoted market prices, and mark-to-market adjustments are
included in investment income. In general, as a matter of policy of the limited partnerships, the
investments in the technology companies held by the limited partnerships will be distributed to the
partners prior to the investee company’s initial public offering.
In March 1997, as part of our venture investing program, we established an internal limited
partnership, Adobe Incentive Partners, L.P. (‘‘AIP’’), which allows certain of the Company’s executive
officers to participate in cash or stock distributions from Adobe’s venture investments. Assets held by AIP